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The South African inclusionary housing policy

Prinsloo, B. D. (2008-12)

Thesis (MBA (Business Management))--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: This study focuses on the inclusionary housing policy (IHP), a concept introduced to incorporate the private sector in actively contributing to the delivery of affordable housing as a by-product of higher income housing delivery, in an effort to promote socio-economic integration and to eradicate informal housing by 2014. The IHP stipulates that between 0% to 30% of new residential developments, measured in units, need to be inclusionary in nature. This means that a unit may be sold from R50,000 to R350,000 or rented for R600 to R3,000 per month to beneficiaries earning
between R1,500 and R7,500 gross income per month. The policy will be implemented in a phased manner with two complimentary strategies, namely the town planning compliant approach and the Voluntary pro-active deal driven
approach. To off set financial burdens, the government has made available six
incentives and the concepts of off site compliance and inclusionary stock credits. The national government has set the requirements and parameters of the inclusionary elements and based on this a number of the possible effects that this IHP might have on residential developments, when looking at the interactions of supply, demand and price,were discussed as well as the views of industry experts. Inclusionary housing will result in social benefits but unwanted social costs as well. Benefits and costs were discussed and even though this policy is not Pareto efficient, based on the Kaldor-Hicks criterion, it is efficient in that the members of society that are made worse off can be compensated by the beneficiaries due to the fact that surrounding property prices that may rise and developers get incentives they would
otherwise not have had access to. This study also looked internationally at the key success factors that were identified in case studies focussing on the United States of America, United Kingdom, Malaysia and China. From this international study, recommendations were made for South Africa's IHP.
Because of various cultures and economies, success factors can not purely be copied but the recommendations should add to sustainable inclusionary developments. Ad hoc recommendations, also inferred from international lessons learnt, were discussed briefly and based on the above findings and recommendations, the accusations made by industry experts were readdressed. Although some areas still remain grey, many were found to be questionable.
No concrete inferences can be made from this study pertaining to the supply, demand or price of residential developments but the following predictions can be made. The IHP is not necessarily going to drive property prices down and the requirements may be accepted by higher income households and therefore socio-economic integration may be successful in South Africa. This is only if the policy remains in its current form and not become law. This is in order to adapt to changing external variables and to incorporate success factors as they become known; if the IHP gets implemented transparently; if suggestions are incorporated from all stakeholders i.e. beneficiaries, developers, governmental spheres and third parties such as financial
institutions and if this policy is phased into the market timeously.